• MON: Israel Rate Decision; Chinese Official PMI (May); German Prelim. CPI (May); UK and US market holidays.
• TUE: RBA Policy Decision; JMMC Meeting; Chinese Caixin Manufacturing PMI Final (May); German Retail Sales (Apr) and Unemployment; EZ and UK Manufacturing PMI Final (May); EZ Flash CPI (May); Canadian GDP (Q1); US ISM Manufacturing PMI (May) and Markit Manufacturing Final PMI (May).
• WED: Israeli Presidential Election; EU Commission Fiscal Proposals/Guidance; Australian Real GDP (Q1).
• THU: Chinese Caixin Services PMI Final (May); EZ and UK Services and Composite Final PMIs (May); ADP National Employment (May); US ISM Services PMI (May) and Services and Composite Final PMIs (May).
• FRI: EZ Retail Sales (May); US and Canadian Labor Market Reports (May); US Durable Goods R (Apr); RBI Policy Decision, G7 Finance Minister Meeting.

RBA POLICY DECISION (TUE): The RBA is expected to keep its Cash Rate Target and 3-Year Yield Target unchanged at 0.10%, and also expected to maintain the parameters of its QE programme. The RBA has frequently reiterated its guidance, with rates likely to remain at the current record low for the next few years, as reaffirmed at its prior meeting, where the Board said it would not hike rates until inflation is sustainably within the 2-3% target, and it is committed to maintaining highly accommodative policy until its goals are reached, but does not expect these conditions to be met until 2024 at the earliest. The central bank also noted in last month’s meeting that the Board was willing to extend bond purchases if required, but added that there was no need to change the yield target, while it will decide in July on whether to roll-over to the November 2024 bond for its targeting of 3-year yields, and whether to extend bond purchases which are on course to end in September. This suggests the upcoming meeting is likely to be a non-event, with participants looking ahead to the subsequent meeting in July for a decision on asset purchases. Incoming data releases have been mixed, which continues to favour a pause in policy; the latest Retail Sales (1.1% vs exp. 0.5%) and Building Approvals (17.4% vs exp. 3.0%) topped estimates. Conversely, April's jobs data was less conclusive, with the Employment Change printing a surprise contraction (-30.6k vs exp. 15.0k) although this was solely due to a decline in part-time jobs (full-time actually increased by 33.8k) and the Unemployment Rate unexpectedly declined (5.5% vs prev. 5.6%). Wage growth was firmer than expected (1.5% vs exp. 1.4%), but remained far from the 3% level where the RBA touted wage growth would need to be sustainably rise above to achieve its inflation goal. As a reminder, the central bank raised its growth forecasts in the recent quarterly Statement on Monetary Policy in which it anticipates GDP Y/Y growth at 9.25% in June and at 4.75% in December this year, while the release of Q1 GDP data next week is also another factor that supports a wait and see approach.

JMMC MEETING (TUE): The JMMC and OPEC+ meetings will take place against the backdrop of a deteriorating COVID situation in Asia, Iranian nuclear talks, and heading into a less COVID-restricted summer period elsewhere in the world. Recent sources have suggested that OPEC+ is likely to stick to the existing plan at its June 1st meeting to ease oil output cuts until July. Under the current quotas set in April, June, and July are poised to see 700k BPD (350k OPEC+ and 350k Saudi) and 850k BPD (450k OPEC+ and 400k Saudi) of oil returning to the market. Since April, the COVID situation in India has continued to deteriorate, but focus on this meeting is seemingly on Iran. Russian Deputy PM Novak noted that OPEC+ was to consider Iran’s return to the market, and it is unclear whether Russia is ready to make room for Iran. ING believes that the oil market can handle both Iranian output boost alongside OPEC+ returning supply, and assumes that Iranian supply will return to 3mln bbps/day by 4Q21. There were also recent reports that the National Iranian Oil Co. is priming oil fields for a swift increase of exports should a deal be reached ; "In the most optimistic estimates, the country could return to pre-sanctions production levels of almost 4 million barrels a day in as little as three months", the report stated.

EZ FLASH CPI (TUE): Eurozone CPI is expected to rise to 1.9% Y/Y in May (prev. 1.6%, range 1.8-2.0%). The increase this year has been attributed to temporary/idiosyncratic factors and the influence of energy prices, as well as base effects; the ECB Chief Economist Lane recently said that there is an almost zero percent connection between reopening price action and fundamental inflation. Given energy’s influence in particular, core measures draw heightened scrutiny, and the super core (ex-food, energy, alcohol and tobacco) is expected marginally above the prior at 0.8% from 0.7%. Overall the view has, for the most part, been that inflation is likely to rebound on a transitory basis before fizzling out somewhat around early-2022; however, price data is perhaps of greater importance now as we go into the June 10th meeting and its influence on the discussion around PEPP’s pace – though ECB policymaker Schnabel makes clear that broader factors including seasonality will be accounted for. Returning to that commentary from Lane he added that within the EZ he does not see the environment for persistent inflation.

CANADIAN GDP (TUE): There is no consensus forecast available yet for Canada's Q1 GDP reading, however, the Bank of Canada's April MPR has pencilled in a +7.0% figure. Canadian bank RBC says the report is expected to reveal another solid quarter in the nation, despite rising COVID cases and pandemic restrictions; RBC itself forecasts a reading of 7.0% annualised, which would follow the 9.6% annualised growth seen in Q4. "Unlike the inventory-driven Q4 rise, the Q1 expenditure breakdown should show final domestic demand representing the vast majority of the gain, mostly via a contribution from residential investment on record-high home construction and resales." And it even argues that household consumption and non-residential investment will still positively contribute to growth in Q1. Meanwhile, RBC expects the April GDP nowcast to show -0.6% M/M as rising cases and renewed restrictions weigh on the retail sector and other, high-touch services sectors.

US ISM MANUFACTURING PMI (TUE)/ SERVICES (THU): The Street expects the manufacturing ISM will be little changed at 60.8 in May (vs 60.7 in April). Other proxies bode well for the data: incoming regional Fed surveys have shown stability at the very least, while the Markit PMI data rose to a record, underpinned by the forward-looking new orders sub-component. Rating agency Moody's says that the ISM manufacturing survey has been strong of late and has been supported in part by the supplier delivery index; "Historically the ISM manufacturing survey doesn’t spend too much time north of 60," Moody's notes. The services ISM is similarly seen little changed in May, at 62.9 vs 62.7 in April. Analysts will be looking at services gauges closely in the months ahead to see how consumers respond to easing pandemic restrictions; a number of policymakers are optimistic for the sector, premised on arguments about pent-up demand.

AUSTRALIAN GDP (WED): The headline is expected to show Q/Q growth of 1.1% (vs prev. 3.1%). Desks note that the Aussie recovery has been somewhat tumultuous given the intermittent lockdowns seen across the quarter alongside the floods in New South Wales and Queensland, which dented coal exports. Westpac also notes that homebuilding and business investment showed robust growth, while public demand is “an ongoing growth engine”. That said, consumer spending remains a wild card, and retail sectors have been weighed on by targeted lockdowns. “A strong showing from services is likely, particularly recreational & personal, as restrictions eased. The wrinkle, a lack of reliable partial indicators on services.”, Westpac says as it forecasts the headline at 1.4% Q/Q.

US LABOUR MARKET REPORT (FRI): Analysts expects 621k nonfarm payrolls to be added to the economy in May, following the ‘disappointing’ 266k jobs added in April. The unemployment rate is seen declining to 5.9% from 6.1% (analysts will be watching participation and U6 ‘underemployment’ closely, which stood at 61.7% and 10.4% respectively in April; both may give a clearer snapshot of the progress being made in eroding slack rather than the headline jobless rate). Weekly initial jobless claims for the coinciding BLS survey period have augured well for the release, while business surveys have also painted an optimistic picture of labour market conditions. Analysts will also be paying close attention to seasonal adjustments; Credit Suisse writes that the adjustment for April may have contributed to some of the weakness last month, but the unadjusted data has been steady recently, and the bank says it is possible the pandemic recovery is disrupting typical seasonal hiring patterns; CS also adds that the seasonal adjustment is still negative for May, but less so than in April. Meanwhile, the wage metric is expected to pare to 0.2% M/M from the prior 0.7% – analysts have argued that, as lower-wage workers return to the sample, these measures will fall (an opposite of the data-compiling quirks observed as the pandemic set in); these measures have offered poor insight into underlying dynamics of wage growth in the pandemic era, Credit Suisse says; "Dramatic turnover in low-wage industries biased this measure higher early in the pandemic, and  rehiring is likely to be a headwind going into the summer," CS writes, "the Y/Y measures are also being thrown around by extreme base effects from the shutdown and reopening last year." The bank points out that alternative measures of wage growth – like the employment cost index, and the Atlanta Fed's median wage tracker show a steadier landscape for wages over the last year. "Going forward," CS writes, "there is likely to be some upward pressure on wages as businesses attempt to rapidly staff up; recent strength in inflation data and rising inflation expectations will likely make the market and Fed more sensitive to any signs of rapid wage acceleration."

CANADIAN LABOUR MARKET REPORT (FRI): There is no consensus yet for Canadian labour market data, but with the country still facing pandemic restrictions, Canadian bank RBC expects to see another decline in May, on the heels of the -207k seen in April. RBC projects 75k jobs will have been lost in May, with those who lost jobs in April still likely to be unemployed in May. The bank says the decline will likely be exacerbated by a large seasonal "hurdle" in the month, and says this usually draws a typical increase of around 350k; around 75k of that will be from the hardest-hit sectors, like hospitality and retail; "as employment in these sectors is expected to hold roughly steady on an non-seasonally adjusted basis, this would leave the headline around 75K short of its seasonal hurdle," RBC writes. It is also worth noting that the Canadian jobs data will be released alongside the US equivalent, and accordingly, USD/CAD trading dynamics may be subject to the relative differentials in performance between the two reports.

RBI POLICY DECISION (FRI): The Reserve Bank of India is seen keeping rates unchanged, with the Repurchase Rate and Reverse Repo Rate likely to be maintained at 4.00% and 3.35% respectively, while the Cash Reserve Ratio is expected to be hiked 50bps to 4.00%, after the central bank already announced earlier this year that it would conduct a two-phase normalisation in March and May, which would return the CRR to its pre-pandemic level. The RBI is also expected to remove INR 1.37tln of primary liquidity from the banking system. The RBI has remained on hold since the last cut in May 2020, after high inflation abruptly halted the rate cut cycle which had culminated in a total of 250bps of cuts since early 2019, and although inflation has since returned to within the 2-6% tolerance band, the RBI recently suggested that it remains concerned about price pressures constraining monetary policy. Governor Das also announced several measures during an unscheduled address early May to provide relief for individuals, as well as small- and medium-sized businesses from the impact of the pandemic, including loan restructuring through a Resolution Framework 2.0 for COVID-related stressed assets and special 3-year long term repo operations valued at INR 100bln for small finance banks (SFBs), with lending by SFBs to Micro-Finance Institutions to be classified as Priority Sector Lending. The RBI also announced a second purchase of government securities, valued at INR 350bln, under the G-SAP, and an on-tap liquidity facility of INR 500bln for fresh lending to vaccine manufacturers and other health services. As such, these recent series of relief measures suggest more room for the RBI to maintain a patient approach on rates, while the central bank’s annual report released on Thursday noted uncertainty and risks clouding the outlook and warned about a risk of a bubble in the stock market amid a widening gap between the real economy and financial asset prices, which furthermore adds to the case for a pause.

G7 MEETING (FRI): The UK is poised to host this year’s G7 meeting with the focus of the gathering likely to fall on Washington’s proposed 15% global minimum corporate tax. The talks will take place among OECD countries, but most of the influential G7s – France, Germany, Italy, and Japan – have in essence backed the proposal, while the UK and Ireland have been more guarded. That said, reports on Friday suggested that Washington is close to providing the necessary commitments to the UK on digital taxation. G7 sources suggested a deal is potentially doable in the upcoming week. OECD negotiators have been aiming for an agreement in principle this summer. A deal among the G7 would be an important precursor to formal negotiations at the G20 summit this July.